We here at Le Cygne Gris are going to make six predictions for the coming year. The first three concern economic developments, the last three concern political developments. They are as follows:
1. Gas will go above $4.00/gallon at some point, and will remain there for at least 26 weeks. With markets collapsing, investors will want to own something real, like crude oil. The shift from stocks and bonds to oil will lead to increased prices.
2. Commodities will be up at least 10% at the end of 2012. For comparative purposes, we here at Le Cygne Gris will select a portfolio of five commodities for comparison. They are wheat, soybeans, feeder cattle, gold, and copper. The current prices are: $6.53/bushel, $12.13/bushel, $1.50/pound, $1,566/ounce, and $3.40/pound respectively. The predicted year-end prices are $7.18, $13.34, $1.65, $1,722.60, and $3.74 respectively. (Current price listings from CNN money.)
3. Housing prices will tank. S&P’s US National HousingIndex places the median house price at $130,3990. I expect it to drop below $120,000 by the end of 2012.
4. There will not be any more QE. Thanks to Ron Paul and many others, The Fed now enjoys a considerably higher level of scrutiny than ever before. Many are beginning to recognize that The Fed is just as political as Congress, and The Fed has already begun to receive the ire of many citizens. If Ben Bernanke had a popularity rating, I imagine that it would be similar to Congress’s. As such, Bernanke and the Fed will have an extraordinarily difficult time trying to pass off massive amounts of inflation on the taxpayer. The Fed will instead have to rely on its normal practice of passing off light amounts of inflation on the taxpayer.
5. The United States will send troops into Iran in the attempt to engage in some sort of conflict. This may not be a war per se, since Congress will likely continue its practice of authorizing the use of force instead of declaring war like The Constitution requires. Nonetheless, the United States will be fighting in Iran by the end of 2012.
6. Obama will be reelected. Obama has comfortably shifted into a do-nothing president, so he hasn’t done anything recently to piss anyone off (except possibly the signing into law the recent NDAA legislation). The negative effects of ObamaCare won’t kick in until 2013, assuming the Supreme Court doesn’t rule it unconstitutional. The army is finally clearing out of Iraq. Osama is dead. The Fed is taking some of the heat for the current economic mess. And, if Obama goes to war with Iran, he will effectively own that issue.
Furthermore, the Republican field is a mess. No one likes Romney, except for his wife and the GOP bosses. Gingrich is a joke that everyone laughs at. Bachmann is Palin lite, except for the rabid support base. Huntsman and the other 3-percenters (now there’s a band name) have no shot. As for Ron Paul, I don’t see how he will win. The media has become its smear campaign and the GOP bosses are hanging him out to dry. He’s more polarizing than Obama, and has no eloquence. An Obama-Paul presidential race would probably lead to one of the lowest turnouts in history, and Obama would win by virtue of having the Chicago machine backing him.
Basically, going into 2012, Obama is in a pretty good position for victory. People aren’t particularly angry at him as much as they’re angry at everyone. He has the potential to outmaneuver conservatives on military issues while still keeping liberals happy. Plus, the GOP seems to be trying to lose the upcoming presidential election. For what it’s worth, we at Le Cygne Gris hope we are wrong about this prediction.